This project was undertaken to investigate the
effectiveness of internal control system and its impact on the activities of
Phinorma Nigeria Ltd Ngwo.
The study is aimed at determining the strength and weakness
of internal control system in Phinorma and how the existing control system has
helped the management in the realization of their organizational objectives. It
also provide base upon which the auditor place reliance when carrying out his
The related literature review shown a brief theoretical
framework of the meaning and important of internal control system in an
organization which is the case study of the project. And also it shows the work
of various authors on the subject of the research project.
Data for the research project were collected mainly through
the use of questionnaire supplemented b interview which was conducted among the
staff of the company. Data collected were analyzed using percentage method of
analysis. Based on the analysis, tests were carried out, which showed that
there is the effectiveness of internal control system in the private limited
study concludes that the success or failure of any business organization be it
private or public depends on effectiveness of internal control system operating
is such company or organization.
TABLE OF CONTENTS
Table of Contents
1. 2 Statement of the Problem
1.3 Purpose of the Study
1.4 Scope of the Study
1.5 Research Questions
1.6 Significance of Study
1.7 Definitions of Terms
REVIEW OF THE RELATED
2.1 Purpose of Internal Control in Phinorma
2.2 Definition of Internal Control System
2.3 Internal Check and Control Phinorma
2.4 Types of Internal Control
2.5 Elements of Internal Control
2.6 Limitation of Internal Control
2.7 Element of Internal Audit
2.8 Internal Audit is Phinorma
3.1 Research Design
3.2 Area of Study
3.4 Sample and Sampling Technique
3.5 Research Instrument
3.6 Reliability and Validity of Instrument
3.7 Method of Data Collection
3.8 Method of Data Analysis
4.1 Data Presentation and Results
5.1 Summary of Findings
5.4 Suggestion for Further Research
1.1 BACKGROUND TO THE STUDY
The concept of internal control system is becoming
increasingly useful in the practice of modern audit that it will be worth while
understanding the subject matter and the role it plays in the effective
management of a business enterprise. The existence of internal control system
in an organization is of great assistance to both the management and the
auditions of such an organization.
Not only does it aid the management in the process of
decision making, it also provide a base upon which the auditions place reliance
when carrying out his audit. With a sound knowledge of the system of internal
control operative in a firm, one can easily make a valid judgement on why a
firm failed or succeed in its business within the period under review.
According to Holmes (1964, 78) who maintained that as
business organization have grown in physical size, as operations have expended
in complexity, and as transactions have supplies itself promptly with reliable
data based on the objectives of assets presentation, error elimination and
income determination. The method of procedures adopted by a business to control
its operations provides the management with an assurance that the data
available are authentic and factual.
Such system of control comprises measurers taken by an
organization for the purpose of protecting its resources against waste and
fraud, ensuring accuracy and reliability of accounting and operating data,
seeming compliance with company’s policy and evaluating the level of
performance in all the sections company. In the words of Meigs (1997, 8) the
basic principle of internal control in that no one person should handle all
phase of a transaction from beginning to the end. He remarked that when
business operations are organized that two or more employees are required to
participate in every transaction; the work of one employee gives proof of the
accuracy of the work of another.
The primary aim of any organization is to achieve a maximum
profit at a minimum cost. This is made possible by the institute of internal
control system which acts as a canopy section of an organization.
This type of control existing in a firm therefore plays a
very important role in the sense that it helps in the efficient conduct of the
firms business consequently. Internal control has been defined by the
institution of chartered accountant of England Wales (vol. xix no 17, 36) as
the while system of controls, financial and other wise established by
management in order to carry on the business of the enterprise in an orderly
and efficient manner, ensure adherence to management policies, safeguard the
assets secure as far as possible the completeness and accuracy of the
It could be inferred from the above definition that
internal control system embraces other controls such as internal check and
internal audit which operates by appraising and reputing the effectiveness of
other control. This will minimize errors, fraud and ensure the presentation of
accurate and reliable data. The success of failure of an enterprise depends on
a large extent on how effective the system of control is, therefore the hope of
the researcher that this study will not only be useful to both employers and
employees in the private limited companies but also to investors and provided
of capital to both public and private enterprises.
1.2 STATEMENT OF THE
According to Osuala (1987, 36) the statement of problem
serves to elaborate upon the information in the title of the study. This study
is concerned with the examination of internal control system and its impact on
the business of PHINORMA Nig. Ltd Ngwo. The problem could be categorized as
general control and application control which firm the basic of internal
control system in any organization.
A research project has two important parts namely: -
The question posed and
the answers. The researcher seeks to find out the extent to which the system of
internal control on PHINORMA Nig LTD Ngwo influences the business by addressing
them to the following questions:-
all transactions from beginning to the handled by the same set of individuals?
far has the existence of internal audit helped to minimize errors and fraud in
employees being supervised made to know their responsibilities and the
consequence of failing to carry them out?
all staff see the company’s goal as a joint responsibility?
the company take adequate step to safeguard their assets including debts being
owned to it?
1.3 OBJECTIVE OF
The objective of research implies the aims of the
researcher in the undertaking the research. It is an overview of the study
itself and related very much to its problem in view of the problem state and
subsequent questions posed the objectives of this research include the
assess the strength and weakness of internal control system in PHINORMA Nig Ltd
Ngwo with the view to determining their ability to minimize fraud.
discuss as far as possible how mismanagement in the manufacturing sector could
be curtailed through the institution of a good internal control system.
ascertain how far the internal control system in PHINORMA had aided the
management in the realization of their organization’s objectives.
make necessary recommendation on how to correct lapses which may be discovered
at the course of this research.
increase the knowledge of research on the internal control system operative in
PHINORMA Nig Ltd Ngwo.
1.4 SCOPE AND
This according to Osuala (1987, 28) is concerned with the
those parts of topic or problems that normally might be considered to be part
of such but which because of limitation of time or other reason, the researcher
cannot or does not wish to include, the thus the researcher would have to
restrict herself to a particular area of concentrate at specific period of
time. So the scope of the research is the effectiveness of the internal control
system and its impact on the activities of PHINORMA Nig. Ltd Ngwo. The firm is made up of one several
departments and sections. For a better appraisal of internal control system in
the firm, one would need to visit several departments and officers’ in-charge
in such departments to access their system of controls.
The researcher encounters a lot of problems while carrying
out her work. Some are worth mentioning hence they have much bearing with the
atmosphere within which the project work has undertaken.
Firstly, time factor: - There is no enough time for the
researcher to do research work thoroughly. During such short time, the
researcher battled with the project and semester’s work load. This hindered the
opportunity of carrying out a data led the research work as could befit the
project at hand.
Secondly, the uncompromising attitude of the staff of the
firm; these people were not prepared to give out some necessary information
needed for reasons of secrecy and self presentation of vital documents.
Consequently, for reasons of fairness some valuable information including
actual documents sourced mentioned or shown in the project.
Finally, the last problem but not the least was lack of
fund to meet occasional demand for transportation fare and other related
necessary materials to enhance a hitch free research work.
It is an overview of the study itself and very much related
to the problem in view and objective of the research. It includes the
what extent does the strength and weakness of internal control system in
PHINORMA with the view of determining their ability to minimize fraud?
what extent does mismanagement in the manufacturing sector could be curtailed
through the institution of good internal control system.
what extent does internal control in PHINOMA aided the management in the
realization of their organizational objective?
what extent are recommendations on how to correct lapses which may be
discovered at the course of the research?
what extent does increase in PHINORMA Nig Ltd being the focus of this study
The purpose of this study is to access the strength and
weakness of internal control system in Phinorma Nig Ltd with the view of
determining their ability to minimize fraud. Also to discuss as far as possible
how mismanagement in the manufacturing sector could be curtailed through the
institution of internal control system.
The primary aim of Phinorma Nig Ltd is to maximize profit
at a minimum cost. Their accounting records shall be sufficient to show and
explain the transaction of the company and shall be such as to disclose with
reasonable accuracy at any time the financial position of the company. This
accounting contain entries from day to day of all sum of money received and
expended by the company and the matter in respect of which the receipt and
expenditure take place and records of assets and liabilities of the company. To
live up to the expectation of such responsibility, the management of Phinorma
has to evolve a strong system of internal control which would not only spell
out a clear segregation of duties among its employees but also set in motion
the machinery of careful supervision of their activities and detailed recording
of transactions in order to minimize fraud and safeguard the assets of the
On the contrary, it is unusual to hear cases of fraud and
mismanagement involving the employees of companies; such is a clear
manifestation of non-existence of internal control system in the affected
companies or that the existing system or totally assent, and member of the
organization. Pyle (1975; 200) there would be nothing but confusion as to what
has been ordered, received, and there would be error, duplications, shortage
and payment for goods not received plus unlimited opportunities for fraud
through kickboards to dishonest employees and through payment of factors
The institution of this system plays a very important role
in the sense that its helps in the efficient conduct of the firms business
The following research questions were formulated in order
to find solutions to numerous problems states in the statement of problem. Also
to determine the effectiveness and impact of internal control system in
Phinorma Nig Ltd. the following research questions are very necessary.
Does internal control in
Phinorma aid the management in the realization of their organizational
Could mismanagement in
manufacturing sector be curtailed through the institution of good internal
Are there recommendations
on how to correct lapses which may be discovered at the course of this
Is there any increase in
the knowledge of research on the internal control system operative in Phinorma
What are the ability of
internal control system in Phinorma with the view to minimize fraud.
The knowledge of research
on the internal control system operative in Phinorma Nig Ltd Ngwo?
1.6 SIGNIFICANCE OF
This refers to the importance or usefulness of the research
to the private limited companies, the individuals and the public at large. The
ultimate aim of every research is to provide knowledge and information that
will bring about a better understanding of the topic under review.
This study is aimed at providing an understanding of the
effectiveness of internal control system as obtainable in the Phinorma Nig Ltd
In addition, the researcher will be able to know the extent
to which internal control system in the company have helped the management in
the realization of the firm’s objectives.
The research will also enable the management to appraise
the internal control system in operations with a view to correcting any lapses
which may be evident during the investigation process. When completed the
research finding and recommendations will form a base to be relied upon by
subsequence researchers which may wish to make further inquires into the system
of internal control operating In Phnorma Nig Ltd Ngwo.
1.7 DEFINITIONS OF
This is the meaning of some of the key words used by the
researcher in the context of this study. It includes: -
Control: - Has been defined by Cook (1976, 135) as the planning,
implementation, evaluating and correction of performance in order to ensure
that organization objectives are achieved. In involves organizational
structure, procedure and records.
Fraud: - According to Mill Champ (1987,16) it
has been defined by the committee guide line on Auditing practices as irregularities
involving the use of criminal deception to obtain an unjust or illegal
advantage. As applied to accounting, fraud constitutes any act or omission of
an act that is required or the commission of a deceitful and therefore
Execution: - The entire cycle of steps necessary to complete the exchange
of assets between the parties or the transfer or use of assets within the
Recording: - All records maintained for transactions and the resulting
assets or services and all functions performed for those records.
Investigation: - Refers to the examination of the records and accounts of an
organization for specific purpose and for a specific period. The purpose may be
for obtaining information of particular nature of work required by a client or
in the case of fraud for the purpose of ascertaining its extent.